Legal bombshell: Shared Appreciation Mortgages unveiled

Shared Appreciation Mortgages (SAMs), introduced by Barclays in 1998, are increasingly causing significant issues for beneficiaries and their families as probate solicitors encounter these complex cases. Specialist financial services litigation lawyer Laura Robinson from Clarke Willmott LLP explores the implications of SAMs and provides guidance for those affected.

The Hidden Costs of SAMs

SAMs were marketed as interest-free loans primarily to retirees, promising no repayments until the property was sold or the borrower moved into care or passed away. The marketing materials suggested that only the capital borrowed would need to be repaid if property prices did not increase. However, the reality was far different: upon redemption, Barclays would take 75% of the property’s appreciation in value along with the capital borrowed.

A Misleading Proposition

In the late 1990s, Barclays issued approximately 3,000 SAMs, capitalising on a period when house prices were relatively stagnant or declining:

• 1990: -10.7%
• 1991: -2.3%
• 1992: -6.5%
• 1993: 1.8%
• 1994: 2.1%
• 1995: -2.3%

However, from 1996 onwards, house prices surged dramatically:

• 1996: 8.3%
• 1997: 12.1%
• 1998: 7.3%
• 1999: 12.6%
• 2000: 9.4%
• 2001: 13.4%
• 2002: 25.3%
• 2003: 15.5%
• 2004: 13.9%
• 2005: 3.2%
• 2006: 9.3%
• 2007: 6.9%

Many borrowers now find themselves owing up to 10 or 12 times the amount originally borrowed, with some debts exceeding £1 million. This has led to severe consequences for many:

• Downsizing Issues: Borrowers struggling to downsize due to insufficient equity.
• Care Costs: Difficulty affording preferred care homes.
• Inheritance Shock: Beneficiaries facing the surprise that their inheritance will go to Barclays rather than the estate.

Challenges and Legal Advice

The complexity of SAMs and the misleading nature of their marketing have left many beneficiaries in distress. Probate solicitors unfamiliar with SAMs often advise seeking help from Citizens Advice, which may not be equipped to handle these disputes effectively.

Laura Robinson advises that if a SAM is discovered in a client’s estate, it is crucial to seek legal advice promptly due to strict time limits for claims and complaints. Robinson and her team at Clarke Willmott LLP offer consultations on a ‘no win, no fee’ basis to help those affected explore their options and potentially seek compensation.

A Call for Justice

Laura Robinson reflects on the issue: “Arguably, these mortgages should never have been sold in the first place. It is difficult to believe that anyone fully understood the terms and the impact. However, we aim to assist those affected by obtaining the compensation they deserve.”

As a partner and financial services litigation lawyer at Clarke Willmott LLP, Robinson’s expertise in mortgage and financial disputes positions her uniquely to handle these complex cases. Her background as a qualified financial adviser further enhances her ability to navigate and resolve these challenging issues.

For those impacted by SAMs, taking prompt legal action could be essential in securing justice and addressing the financial repercussions of these problematic mortgages.